Practice Tips: Correcting Real Estate Documents

Correcting real estate documents just got easier with the creation of Wis. Stat. section 706.085. Effective May 28, 2010, corrections to real estate documents may be made by a correction instrument. The author describes the types of errors that may be corrected, who may sign the documents, and how the notification of correction is to be made and provides tips for drafting and executing correction affidavits.

Earlier this year, Gov. Jim Doyle signed into law a bill allowing for the correction of errors on real estate documents.1 Previously, it was uncertain how a real estate document containing errors was to be corrected: by a court order or by an affidvait. Historically, affidavits of correction were commonly used to correct minor errors, but after the 2007 decision in Smiljanic v. Niedermeyer, the validity of those affidavits came into question.2 In Smiljanic, the court of appeals invalidated a recorded affidavit of correction because there was no statutory authority supporting the use of such an affidavit, and, the court stated, the only remedy for correcting an error was by court order. After Smiljanic, real estate attorneys continued using affidavits of correction, but until 2009 Wis. Act 348 was passed allowing for correction instruments, it was uncertain whether the affidavits were recognized as correcting the error.3

History of Correcting Real Estate Documents

Correcting real estate documents has been a common practice since Wisconsin became a state. After 1969, however, there was no statutory authority allowing for the corrections except by a court order. Former Wis. Stat. section 235.46 (1955) allowed for the correction of real estate documents and outlined the types of errors that were allowed to be corrected and how those errors were to be corrected.4 That statute was repealed in 1969. It is unknown why the legislature repealed it, but the change was among several changes made to real estate law that same year. According to some lawyers, it was not apparent whether the change was intended to outlaw the use of affidavits.

After 1969, the Wisconsin statutes were silent as to how – except by using a court order – real estate documents could be corrected. However, because many attorneys thought the law did not specifically prohibit the use of affidavits of correction, attorneys still regularly used them. After Attorney General Opinion OAG 6-90 (1990) outlined specifications for rerecording a real estate document, the Register of Deeds Association created an affidavit of correction for correcting real estate documents. This affidavit, which was used commonly throughout Wisconsin, was a recordable document that contained spaces for listing the error that occurred, the document that was being corrected, and a short description of the correction.

7 Tips: Drafting and Executing Correction Affidavits

The new correction-instrument statute – section 706.085 – provides greater clarity in an area in which there has been much ambiguity. To ensure compliance with the law, lawyers executing correction instruments should do the following:

Determine Who May Sign the Correction InstrumentThe statute states that a person with personal knowledge must sign the correction instrument. It further limits that only a grantor, grantee, drafter of the original document, or settlement agent may sign. Additionally, if the correction instrument “adds, removes, or replaces a divisible property,” the statute provides additional restrictions on who may sign.11

Identify the Basis for a Person’s Personal Knowledge12There has been much debate about the extent to which personal knowledge needs to be defined in the correction instrument. Some attorneys believe that stating the role of a person, such as “grantor” or “settlement agent,” meets the statute’s requirements. Other attorneys think the corrective instrument should include a statement describing the person’s personal knowledge, especially when the drafter and the settlement agent are signing the corrective instrument. The following is language that may be used to further identify the basis for a drafter’s personal knowledge: “I have reviewed prior conveyances of this parcel. The prior conveyances are consistent in stating that the initial call number is for 15 feet whereas the deed that I drafted states the initial call number is 14 feet, and therefore, I have deduced that the document I drafted contains an error.”

Clearly Define the ErrorWhen the error is being defined on the affidavit, attorneys should state the error in plain language. It is common when correcting an error in the legal description to restate the entire legal description, but doing so does not necessarily make the error clear. Instead, the preparer should simply state the specific error that was made. For example, the following language could be used to correct the wrong lot number: “The lot number was incorrect on the above stated warranty deed. The lot being conveyed should have been Lot 14 instead of Lot 15.”

Attach the Complete Legal DescriptionAttorneys should always attach to the corrective instrument an exhibit with the complete legal description that should have been contained in the initial document.

Determine When a Transfer Return is NeededIf the correction instrument constitutes a conveyance under Wis. Stat. section 77.21(1), then a Wisconsin real estate transfer return must accompany the correction instrument when recorded. Additionally, in a recent Real Estate Transfer News, the Department of Revenue stated, “A Transfer is required when an Affidavit of Correction adds or deletes a name or parcel to correct the original deed.”13Attorneys should expect to hear from the county tax listers regarding the corrections being made and be willing to work out any issues that may arise. Tax listers have a duty to “prepare and maintain accurate ownership and description information for all parcels of real estate in the county.”14 Because this is new territory, it is likely that listers will have questions. Currently, tax listers only receive the correction instrument when a transfer return is filed, but real estate attorneys are encouraging the registers of deeds to make it standard practice to provide the correction instrument to the tax lister regardless of whether a transfer return is filed.

Notify the Parties to the Original AgreementThe statute requires the person executing the correction instrument to send by first-class mail a notice of the correction to the last-known address of all the parties to the transaction. As proof of notice, the executor should include with the correction instrument for recording, an affidavit of mailing or certification indicating to whom and where the notice was sent.

Use Plain LanguageWhen preparing correction instruments, attorneys should be clear and use plain language. Title searchers at title companies have to interpret the meaning of correction instruments and previous affidavits of correction. The vast majority of title searchers do not have law degrees, and when corrective instruments are written ambiguously or cloaked in legalese, a legal opinion is necessary for clarification. Corrective instruments should be written so a person not trained in the law can understand them.

It was not until Smiljanic that a court ruled that an affidavit of correction cannot be recognized because it has no statutory authority. In Smiljanic, an affidavit of correction had been recorded 50 years before the case was brought to correct a deed that mistakenly neglected to include an access easement. The court held that the affidavit was improper because Wis. Stat. section 235.46 (1955) had been repealed, leaving a court order pursuant to Wis. Stat. section 847.07 as the only relief to correct the deed. Additional arguments were made by Smiljanic stating that Wis. Stat. section 706.09 “bars an attack on the facts asserted in the affidavit because it was recorded more than five years ago.” The court also rejected this argument, holding that because the affidavit was not a proper conveyance, Smiljanic could not benefit from Wis. Stat. section 706.09.5

To try to create certainty where there had been none, the Wisconsin Registers of Deeds Association, the Wisconsin Real Property Listers Association, and the Wisconsin Land Title Association formed a committee to determine how affidavits of correction should work and to pass a law to allow their use. One of the committee leaders, who also was Mr. Smiljanic’s legal counsel, commented that the need for a law was glaring. The resulting law, 2009 Wis. Act 348, was published on May 27, 2010, and became effective May 28, 2010.

New Wis. Stat. Section 706.085

Section 706.085 covers four main subjects: 1) the types of errors that may be corrected by the correction instrument, 2) the mechanics of signing and recording the correction instrument, 3) limitations on the parties who may sign certain types of affidavits, and 4) the legal effect of a recorded affidavit, including the validity of affidavits of correction recorded before the statute took effect on May 28, 2010.

The statute specifically limits the use of a correction instrument to real estate documents that are conveyances. A conveyance is defined as including “deeds and other instruments [such as mortgages] for the passage of ownership interests in real estate, including contracts and assignments of a vendee’s interest therein, including instruments that are evidence of a sale of time-share property, …”6

The statute lists types of errors that may be corrected by a correction instrument, including a party’s name, a party’s marital status, the date on which the conveyance was executed, whether the property is a homestead, the tax parcel number, the identity of the drafter, the recording data for an instrument referenced in the conveyance, the nature and purpose of the conveyance, the title of the conveyance, the facts relating to the acknowledgment or authentication, and the legal description.7 This list includes the most common types of errors made in real estate conveyance documents. It is unclear whether under the statute, a correction instrument may be used for an error not on the list. There is no “other” category in the statute, but the language does not seem to be exclusive to the types of errors that are enumerated.

The correction instrument must be acknowledged or authenticated, must make reference to the conveyance that it corrects, must be signed by a designated individual, and must be sent to the parties to the original conveyance.8

The signer must be “a person having personal knowledge of the circumstances of the conveyance and of the facts recited in the correction instrument” who also is 1) a grantor, 2) a grantee, 3) the drafter of the conveyance, or 4) the “person who acted as the settlement agent in the transaction that is the subject of the conveyance….”9 The statute is even more specific as to who should sign if the correction instrument adds, removes, or replaces a divisible parcel.

A correction instrument that complies with the statutory requirements “is prima facie evidence of the facts stated in the instrument; is presumed to be true, subject to rebuttal; and constitutes notice to a purchaser under 706.09 of the facts recited in the instrument.”10 Additionally, previously recorded affidavits are grandfathered if they would have been accepted under the terms of the new correction-instrument statute.

Forms

There are few standard correction- instrument forms currently available. The State Bar Real Property, Probate and Trust Law Section (RPPT) is in the process of creating a form, but until one is available, many attorneys and title companies are creating their own correction-instrument forms.

The only form currently available to attorneys is sold by INFO-PRO (www.infoproforms.com), a Wisconsin legal forms provider.

Conclusion

After Smiljanic, it was unclear how to deal with errors in real estate documents because the court invalidated an affidavit of correction for lack of statutory authority. Because 2009 Wis. Act 348 was passed, attorneys can rest assured that most errors are correctable, and hopefully, an error in a real estate document will not bar someone like Mr. Smiljanic from fully enjoying his property rights.

Sara B. Andrew, Marquette 2006, is a partner with Andrew Law Offices S.C., Fond du Lac. Her practice consists of a wide variety of real estate and estate planning matters. She also is president and COO of Information Professionals Co. (INFO-PRO). Reach her at com sandrew andrewlawoffice andrewlawoffice sandrew com

Endnotes

12009 Wis. Act 348. The law became effective on May 28, 2010, one day after publication.